October 2, 2012

Obama’s plan makes tax credits available to people who get health insurance from exchanges set up by state governments. If states don’t establish those exchanges, the federal government will do so for them. The federal exchanges, however, don’t come with tax credits: The law authorizes credits only for people who get insurance from state-established exchanges.

The idea seems to have been to get the states to set up the exchanges, but many — opposed to health care reform — have declined, despite the incentive. So the federal government will have to provide the exchanges, but without the tax credits, people won't be able to afford to buy the insurance.

States have another incentive to refrain from setting up exchanges under the health-care law: It protects companies and individuals in the state from tax increases. The law introduces penalties of as much as $3,000 per employee for firms that don’t provide insurance -- but only if an employee is getting coverage with the help of a tax credit. No state exchanges means no tax credits and thus no employer penalties. The law also notoriously penalizes many people for not buying insurance. In some cases, being eligible for a tax credit and still not buying insurance subjects you to the penalty. So, again, no state exchange means no tax credit and thus fewer people hit by the penalty.

Ponnuru's analysis meets an obstacle: "In May, the Internal Revenue Service decided it would issue tax credits to people who get insurance from exchanges established by the federal government." But his response to that is that these companies and individuals who are set to avoid the penalty will now get stuck with it, so they will have legal claims to challenge the IRS policy. The statute clearly says no tax credits, and there's an expensive consequence for them if the IRS deems the credits into existence.

The statute does not clearly (or even unclearly) say "no tax credits." This is the kind of glitch that treasury regulations have routinely fixed for decades, and they will fix this one. There's a lot to dislike about Obamacare, but this supposedly backfiring incentive isn't one of those things.

Alan said...The statute does not clearly (or even unclearly) say "no tax credits." This is the kind of glitch that treasury regulations have routinely fixed for decades, and they will fix this one. There's a lot to dislike about Obamacare, but this supposedly backfiring incentive isn't one of those things.

Yea, and Obama calls Romney the out-sourcer. This kind of thing is exactly why jobs move off shore. It's not really all wages differential - it's that hiring a worker in the U.S. is like adopting a child.

This is not at all surprising considering that the people who wrote and voted for this monstrosity either have no clue about how incentives and consequences actually work, or have very different goals than they would admit to.

As I understand it, what it does say is explicitly, tax credits are given when the paragraph which covers state exchanges is in pay. That tax credits section does not also pointtonthe different branch of the logic tree where federal exchanges are invoked. In code speak

"Only the blue states will set up exchanges I imagine, which will send even more busineses fleeing to red states."

I've been working on it for months now. Not only because of this, but for all that comes with the blue hue. No blue state will be considered as possible home for my nearly 100 employees. The move will cost us well into 7 figures, but it's still worth it, and pays for itself quickly.

"I've been working on it for months now. Not only because of this, but for all that comes with the blue hue. No blue state will be considered as possible home for my nearly 100 employees. The move will cost us well into 7 figures, but it's still worth it, and pays for itself quickly."

Might I suggest Tennessee. We're doing pretty well down here and there's no state income tax. Property taxes are low, too.

Of course the republicans can always be obstructionists in the sequestration drama by demanding a universal waiver as a condition of agreeing to some kind of resolution to the upcoming tax crises. And that is assuming Obama gets elected.

more GOP-leaning states that get more in federal funding than they contribute in federal taxes

Among the many problems with the sort of study this idiot paraphrases without linking to are that it typically treats expenditures inside a state for a legitimate federal purpose as a "get" for that state, when Fort Hood doesn't belong to Texas any more than Camp Pendleton exists for the sake of California; conflates a state and its citizens; and pretends that within each state there should be a balance between money paid in to federal entitlement plans by current workers (note how those plans become part of general federal revenue and expenditures when it's rhetorically convenient for machine to claim them that way) and dollars distributed to retirees.

One candidate wants to repeal Obamacare, one candidate invented it. One opposed the auto industry bailout, one takes credit for it. One doubts the scientific consensus about climate change, one believes in it. One wants to “voucherize” Medicare, one wants to save it. One dismisses nearly half of Americans as a bunch of moochers, and one claims to champion the struggling middle class.

...ah yes, more GOP-leaning states that get more in federal funding than they contribute in federal taxes.

To add to what bgates said: do you not want progressive taxation? Isn't an obvious consequence of progressive taxation that states where there are more rich people pay more per capita in Federal taxes than do states where there are more poor people, and that, even assuming that Federal spending is distributed absolutely evenly, an equal number of bucks per head, the result will be a transfer of money from rich states to poor states? And what about that outcome, exactly, don't you like?

Pelosi was right after all -- they had to pass the bill before anyone could figure out what was in it. Including the geniuses who drafted and passed it.

Glitches like this would, in the normal course, be fixed by corrective legislation. Since the statute was passed pursuant to Congress' taxing power, only Congress can fix it by using that same power. Accepting Ann's suggestion that employers who are adversely affected would have standing to challenge the IRS memo (reg? ruling?), it seems highly unlikely that it could be upheld if the statutory text is as clear as Ponnuru says. But Congress won't act to fix the glitch given that nothing that might extend the life of ObamaCare has a chance of passing the House (or could even get a vote in the Senate).

"One candidate wants to repeal Obamacare, one candidate invented it. One opposed the auto industry bailout, one takes credit for it. One doubts the scientific consensus about climate change, one believes in it. One wants to “voucherize” Medicare, one wants to save it. One dismisses nearly half of Americans as a bunch of moochers, and one claims to champion the struggling middle class."

Tell me which one is Romney ? The suspense is killing me. I especially like that "scientific consensus." Corruption certainly makes for good science.

it's a real mystery why unemployment remains high. It will be a real mystery as to why outsourcing will increase next year too.

Oh, no mystery at all. Business owners, at least the ones who aren't enlightened enough to donate to Present Zero, are greedy, money grubbing, selfish capitalist pigs who aren't hiring strictly out of partisan and/or racist spite.

OBAMACARE enhances outsourcing. Enacted in July 2010, The U.S. healthcare reform (“ObamaCare” or the “Patient Protection and Affordable Care Act”) is intended to pressure large and small employers through force and taxation. The result will show companies deciding to send customer support, sales, lead generation and appointment setting jobs offshore or risk going out of business. U.S companies can take advantage of a dedicated bilingual employee who is 100% committed to their project. ESL nearshore employees in Costa Rica are just as or more effective than transitional in-house employees. In addition, giving the business the freedom to scale up their offshore staff strength without getting caught in the Obamacare challenge in 2014. http://www.obamacareoutsourcing.com